State Legislatures can levy tax on lotteries organised by other states: SC

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New Delhi: The Supreme Court on Wednesday held that State Legislatures have the power to tax lotteries organised by other states.

A bench of Justices M R Shah and B V Nagarathna said a lottery conducted by the Government of India, states or authorised by a state or conducted by private entities is an activity falling within the nomenclature of 'betting and gambling'.

The apex court allowed the appeals filed by Karnataka and Kerala governments and set aside the orders of Karnataka and Kerala High Courts which held that they lacked the legislative competence to levy tax on the lotteries.

"The State Legislature has the competence to tax lottery scheme which is gambling being conducted not only by the Government of India or the Government of any State or by any other agency or instrumentality of a particular State but also by a private entity within the State as gambling," the bench said.

The top court said that the high courts were not right in holding that the State Legislatures had no power to levy tax on lotteries conducted by the Government of India or the Government of any State or Union territory in the State of Karnataka as such a power could be read in Entry 40 or Entry 97 of List I and only the Parliament could levy such a tax.

Entry 62 of List II

"We hold that the tax sought to be imposed by the State Legislatures of Karnataka and Kerala by way of the impugned Acts, is traceable to the power conferred on the State Legislatures under Entry 62 of List II.

"The said entry contemplates imposition of taxes, inter alia, on the entire genus of 'betting and gambling' having concluded that 'lottery' of every kind, whether organized by the Government of India or the Government of a State or by a private entity is included within the genus of 'gambling', we find no reason to hold that State organised lotteries are excluded from the ambit of 'betting and gambling' as appearing in Entry 62 of List II," the bench said.

The apex court said that in the context of lotteries, the organisation and conduct of a lottery scheme being a pan India activity, when any State government permits the Government of India or any other state government to organise the lottery scheme in that state, Entry 62 of List II would enable the Legislature of that State to levy taxes on the same.

"Hence, in our view, the Legislatures of the State of Karnataka and Kerala were fully competent to enact the impugned Acts and levy taxes on the activity of 'betting and gambling' being organised and conducted in the said respective states, including lotteries conducted by the Government of India or the Government of any State," the bench said. 

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